The Pittsburgh Penguins have the following capital structure. The company's tax rate is 35%. Debt: 7,000 8% coupon bonds outstanding, $1,000 par value, 20 years to maturity, selling for 104 percent of par, the bonds make semi-annual payments Common Stock: 120,000 shares outstanding, selling for $82 per share, beta is 1.2 Preferred Stock: 10,000 shares of 5.25 percent preferred stock outstanding, currently selling for $80 per share Market: 7% market risk premium and 4.5% risk free rate A) What is the Penguin's WACC? B) Mario Lemieux, owner of the Penguins, has approached you about their capital structure. He wants to know why the company doesn't use more preferred stock financing, since it costs less than debt. What would you tell him?